Economic and monetary union: underlying imperatives and third-stage dilemmas

Abstract

On 1 January 1999, the third and final stage of economic and monetary union (EMU) is scheduled to begin. Assuming that the member states of the European Union (EU) adhere to the terms of the Treaty on European Union, on that day a new European Central Bank will assume full responsibility for defining the monetary policy of the member states that have moved to the third and final stage of EMU and the conversion rates of the currencies of those member states will be irrevocably fixed against each other and against a new currency, the euro. This article examines some of the underlying imperatives and third-stage dilemmas of EMU. After considering some of the reasons why, despite the high costs associated with qualifying for the third stage, most if not all of the member states perceive EMU to be in the national interest, the article considers several of the economic, political, and institutional issues and dilemmas that are likely to confront the participating member states in the third stage.

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